Staying on Track - Why we continue to insist on the importance of having a Financial Strategy
by Chris Tetzner, Senior Paraplanner
Many of us, when we consider financial planning or investment, like to imagine that someone’s going to wave a magic wand and then produce a definitive one-off document that will put us on the path to financial independence – even untold riches.
If only that was so. Unfortunately, not only is this unrealistic, but it’s not possible, simply because so much can – and usually does – happen in a person’s lifetime: circumstances change, often with startling rapidity. Our aspirations take a different direction, reality intervenes, there are unforeseen economic highs and lows – in short, life happens.
In spite of this, or because of this, it’s essential you set long term financial goals for yourself, strive continuously to achieve them and be willing to modify them according to changing circumstances. Leaving your financial fate to luck certainly will not work.
That’s why at the John Hopkins Group we encourage all of our clients, without exception, to go through the process of developing a Financial Strategy. It will not be possible to document everything with finite accuracy, but what creating a Financial Strategy does do is plot a financial direction for you. It sets out in black and white things you have to do and when you must do them. Most importantly, it demonstrates your commitment to this essential process.
Henry Kissinger once said, “If you don’t know where you are going, every road will get you nowhere.” He wasn’t (to the best of my knowledge) talking about financial strategies, but he might well have been.
So never underestimate the importance of having a Financial Strategy. It’s an obligatory step towards achieving your financial independence.
Why you receive a Statement of Advice.
A Statement of Advice (SoA) is the document the Australian Securities & Investments Commission (ASIC) requires every licensed financial adviser to give to their clients each time they provide them with formal advice. So each time your John Hopkins Group financial adviser advises you on your financial situation, you also will receive one.
Although it will vary depending on your personal financial situation at the time, it will always detail our product recommendations, as well as the strategic reasons behind those recommendations.
A John Hopkins Group SoA sets out in a clear and concise manner:
- The advice given and the reasoning behind that advice
- Information regarding any remuneration and benefits that the adviser is entitled to receive as a result of giving that advice
- Any conflicts of interest that may affect or influence the advice given
- The costs, loss of any benefits and other significant consequences should the advice involve switching between financial products
You should look at your SoA as the tool your adviser uses to provide advice that takes into consideration many future issues, but is primarily concerned with specific recommendations for the present.
As I said before, it’s neither realistic nor possible for an adviser to provide you with advice that covers your financial situation from the first time you meet right through to the end of your life. Why not? Because so many things happen to us in a lifetime: we get married (and possibly divorced), have children (who may eventually leave home!), change jobs (maybe even have to get by without work), buy bigger houses (even a weekender), suffer serious illnesses, have accidents, and so on and so forth.
So a Statement of Advice can only cover issues that are pertinent to the time in which they’re issued, just as your next SoA will cover the issues pertinent to a later time. Although an SoA looks to the future, it’s very much based in the present.
Typically, our clients review their personal Financial Strategy every 12 months, and more frequently if required.
The thought I’d like to leave you with is this: financial success, like investing, is an ongoing process. It spans an individual’s lifetime, and isn’t just something you pick up today, then ignore until the day you retire.
So if you still haven’t got your Financial Strategy in place and are not already acting on it, then I respectfully encourage you to book an appointment with a John Hopkins adviser today.
Because we’re going to continue to harp on about it until you do!
For more information, or to arrange an appointment with a John Hopkins Financial Adviser, please contact our Client Liaison Officer on 1300 726 082 or click here.